Financial activism – can fintech save the world?
Consumers and businesses alike have faced some of the most challenging years in recent memory due to the financial impact of the pandemic. With spiralling inflation, a recession on the horizon and supply chain problems set to further impact the cost of living; can innovative fintechs help companies and people to weather the coming storm?
For many people on the lowest incomes, digital banks can prove to be a lifeline that saves them hundreds of dollars a year. According to research from the Harris Poll, the median fintech user saves $360 a year in banks fees and interest, as well as almost half (47%) of consumers who live paycheck to paycheck report using fintech to manage short-term financial issues.
Innovative features offered by fintechs go beyond what traditional banks can provide, with many digital banking platforms helping customers more effectively manage their finances. For example, challenger banks like Monzo give customers the option to get their salary a day early for free.
There are countless more fintech apps that support budgeting and savings, with the Acorns app rounding up transactions and saving this money for a rainy day. Other financial technology firms, such as Chime, provide users a bank account with the ability to build up a credit rating and gain access to a fee-free overdraft, all for no monthly cost.
At a time when budgets are tightening, fintechs like Copilot enable users to view all of their expenses, bills and subscriptions in one place, so that they can look for unnecessary subscriptions and identify where money is being wasted. The same Harris Poll research found that 56% of Americans surveyed say “they could not have kept up with their finances during COVID-19 if it weren’t for digital apps, products and services.”
Sarah Kocianski, Fintech Strategist, SJK Insights
Many fintech companies have made putting customers first their reason d’etre. Those that hold fast to that tenet will retain their integrity and have the potential to make their customers’ lives significantly better over what will be a coming period of serious financial hardship for a significant number of people.”
A “perfect storm” of labour shortages, the Russia-Ukraine war, COVID lockdowns and demand shifts have caused global supply chain problems in a range of sectors. While there may be no one single solution that addresses all the challenges facing worldwide supply chains, fintechs can help firms unlock new sources of working capital.
The efficiencies offered by Fintech firms go a long way in streamlining outdated and siloed financial systems that make funding the supply chain easier than before. Fintechs like Taulia and PrimeRevenue offer solutions to optimise working capital in all areas of the supply chain.
By speeding up payments to suppliers and extending payment terms to buyers, alongside other benefits like improving liquidity and making payment timings more scheduled, all players stand to gain. For example, fintech Taulia processes over $500 billion a year through their technology and works with firms as diverse as Nissan, Airbus and Vodafone. Administrative burdens and poor buyer to supplier relationships can be made a thing of the past as processes get streamlined and payment issues become less damaging.
Individually these fintech innovations won’t have a major impact, but their combined impact can be substantial, especially as the financial outlook continues to worsen for many and even a relatively small financial boost can mean the difference between success or failure.
An observation echoed by Robin Scher, Head of Fintech Investments Lloyds Banking Group
Fintech will not be the silver bullet to solve current challenges, but it will certainly make financial wellbeing more manageable for a greater number. It is crucial for the industry to work together to ensure that as many people as possible can easily access new innovations and technology that could support their financial needs at this time.
To hear a fantastic group of fintech thought leaders discuss and debate this topic, join us for the Big Debate: Financial activism – Can fintech save the world? at the Fintech Talents Festival on the 14 & 15 November at the Brewery in London.
By Finbarr Toesland, Editorial Contributor, VC Innovations